Proposals on Bank Reform

I want to compliment you on your balanced and realistic editorial on the Treasury Department's proposals to modernize our nation's banking system ("Bottom Line on Reform: Care and Comprehensiveness," Feb. 10).

I believe the Treasury plan will improve safety and soundness by creating a more profitable and competitive financial system--to the benefit of consumers. As you rightfully point out, the industry is hampered by an archaic legal and regulatory structure--conceived nearly 60 years ago--which encourages penalty-free risk, prevents product and geographic diversification and discourages new capital from entering the industry. Next to junk bonds, there are few financial vehicles as risky as the traditional bank loan.

But there's no advantage in being cautious. Both industry restructuring and deposit insurance reform should be expedited by Congress in tandem. The two are inseparable because the health of the bank insurance fund is directly correlated to the health of the banking industry.

To take Rep. Henry Gonzalez's analogy (Commentary, Feb. 20) one step further, it makes little sense to set a speed limit until we know what the highway looks like, or in which direction it will travel. Likewise, it would be backward to insure depository institutions before knowing what kind of system we want to insure.